UNION OF INDIA Vs. SHAH BUILDERS

JUDGEMENT

(1.) THE appellants have taken exception to the Order dated 11th March, 2005 passed by the 1st Additional District Judge, South Goa, Margao in granting injunction against the appellants in invoking the Bank Guarantee by way of interim relief.

(2.) IT is the case of the appellants that the respondent was allotted work of provision of Additional Hanger and allied works at INS Hansa by Work Order dated 28. 6. 91. On 9. 7. 91 Work Order No. 1 was issued by Garrison Engineer Sea Bird, Vasco-da-Gama with effect from 15. 7. 91. As per the terms of the contract under which the Work Order was issued, the respondent was required to furnish Bank Guarantee in the sum of Rs. 1,50,000/- towards Retention Money and accordingly on 3. 8. 91 the respondent furnished Bank Gaurantee in the sum of Rs. 1,50,000/- from the Union Bank of India, Pune Branch in favour of the appellants. On 14. 1. 93 work was completed and therefore the respondent was informed that the final bill has been prepared and under finalization and intimated that Schedule 'b' stores is overdrawn and requested Respondent to attend the office for finalization by their letter dated 10. 07. 99 respondent was called upon to return Schedule 'b' Stores which was overdrawn by 5. 10. 99, failing which the Department would be forced to recover recovery at double the market rate to which the respondent replied by notice dated 25. 9. 99 denying the claim. Therefore on 5. 3. 03 the appellants put the respondent on notice that recovery be made under Condition No. 10 (B) of IAFW 2249 of General Conditions of Contract which was disputed by the respondent by their letter dated 9. 5. 03. On 1. 9. 04 the respondent extended the Bank Guarantee upto 30. 09. 2005. On 2. 12. 04 the respondent requested for appointment of Arbitrator under Condition No. 70 of IAFW 2249 of General Conditions of Contract. In the meantime by communication dated 9. 12. 04 Military Receivable Order (MRO) for Rs. 1,95,696. 40 was forwarded to the respondent for effecting payment and was also informed that the claim forwarded by the respondent was not agreeable to the appellants. In the meantime the respondent approached the Trial Court and filed an application under Section 9 of Arbitration and Conciliation Act, 1996 and sought injunction against the appellants restraining them from invoking the Bank Guarantee and also approached this Court for appointment of Arbitrator under Section 11 of the Arbitration and Conciliation Act which was disposed of by this Court by referring the dispute to an Arbitrator. In the meantime the District Judge on 11. 3. 05 passed the impugned order on 5. 5. 05 in Arbitration Petition No. 2/2005.

(3.) IT is in this set of facts that the impugned order is challenged by the appellants on the ground that the trial Court could not have granted injunction under Section 9 of the Arbitration and Conciliation Act, 1996 preventing the appellants from enforcing the Bank Guarantee. It is submitted that now it is well settled by a catena of decisions that Bank of Guarantee can be invoked by a party in whose favour it has been given independent of the dispute arising out of a contract and therefore the trial Court erred in arriving at a conclusion that the claim has not crystallized for appropriation. The appellants cannot be permitted to encash the Bank Guarantee and therefore the impugned order deserves to be quashed and set aside.